Banks Ease Lending Standards Regardless of Regulations

Banks Ease Lending Standards Regardless of Regulations

In a recent report issued by the Office of the Comptroller of the Currency (OCC), certain areas of concern were highlighted which identified where banks took on more risk in pursuit of profits: high-yield loans issued to more speculative borrowers and indirect auto loans issued by banks to through car dealerships. Similarly, banks are also easing lending standards on commercial loans.

With demand for financing still at an all-time high, a finite pool of lending opportunities, low interest rates, intense competition, slow growth and increased governmental regulation, banks are feeling the pressure to increase revenue in today’s current economic climate. According to the report, the increased risk taking comes as banks continue struggling to generate strong profits in the aftermath of the 2008 financial crisis. The industry’s overall net income set a record in 2013, rising 12% from a year earlier to almost $108 billion. The previous record was in 2006, and the fact it took the industry seven years to top that reflects “the weak nature of the banking recovery so far”.

Current regulation, brought about by the Dodd-Frank legislation, which capped the amount of commissions and fees banks can charge for originating loans have seemed to create a scenario where banks are now taking on higher risk loans in order to compete and make a profit in this new era of extreme banking regulations. It is clear that if congress had truly understood the marketplace, they would not have produced the income problems which Dodd-Frank has unfortunately created.

Capstone Business Funding, LLC understands the concerns of commercial borrowers who are considering bank financing. Accordingly, we offer various business finance options, including “Single Invoice Factoring” which functions as a safer alternative to traditional, and often times unpredictable, bank financing. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Business Funding.

Give us a call today to find out how we can help you. Our underwriting guidelines are simple, straightforward and not subject to stringent regulatory oversight and control.Capstone Business Funding, LLC specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Call Capstone at 347-821-3400 or email info@capstonetrade.com today and speak with a representative.

[1]Lenders Are Warned on Risk-Regulator Urges Caution by Banks About Standards Amid Competition, By Victoria McGrane And Gillian Tan